Study On The Legal System Of Stock Option

The separation of ownership and the power of control make it necessary toestablish a mechanism to motivate the management to act as the shareholder. Stockoption is such a system. Because only the stock price rises can the managementincreases the income from the margin between the exercise price and the market priceof the stock, management should work hard for the long-term development ofcorporation. At the same time, with the improvement of the level of science andtechnology, we must make new adjustment on the structure of corporate governancein order to reflect the position and importance of the proprietors of human capital.This article discusses the legal problems of stock option system from incentive andrestrictive aspects. It is composed of five chapters.The fist chapter is the introduction and recommendation of stock option. Thischapter introduces the conception, theoretical basis, limitations and the legal qualityof stock option. There are about three different viewpoints about the legal quality ofstock option. By analyzing the characteristics of stock option, the author point out thatthe right of stock option is evolutive right。After the Enron event, negative aspects ofthe stock option are revealed, so the limitations of stock option are also to bediscussed in this chapter.The second chapter discusses the differences of stock option from other typicalsalary incentive mechanism. From comparison,it is the judgment that stock option,as a long-term incentive mechanism,is a necessary measure to correct the short-sightof the management. On the other hand, whether this mechanism is adapted to acorporation, it depends on the characteristics of this corporation and the condition ofentire enterprise and the stock market.The third chapter includes two parts about how to design an effective stockoption system. The first part gives some ideas to making stock option have moreincentive force. The second part provides some corresponding suggestions on how toavoid the risk of stock option.The fourth chapter focuses on analyzing the practice and regulation of stockoption in China. By emending corporate law, securities law,law of tax, accountingstandards and so on,the present legislation has provided rooms for development ofstock option in china.The last chapter is about the future of stock option in china. Although the presentlegislation has provided basic guide to develop stock option, more regulation and ruleis needed to ensure this system not only a long-term incentive one, but also aregulated one.